What Is a Commercial Credit Memo and What Must It Contain?

A commercial credit memo is the written credit analysis an underwriter prepares to support an approval decision on a business loan. It must contain the request and structure, the borrower and its ownership, spread financials, repayment capacity, collateral and lien position, the risk rating and its rationale, covenants, policy exceptions, and a recommendation naming the approving authority.

Key facts

• In YuSight, 100% of the figures in a credit memo are cited, with one-click verification back to the page of the tax return, transcript or spread each number came from.
• Federal standards define what the memo has to accomplish, not what it looks like. Under the Interagency Guidelines Establishing Standards for Safety and Soundness, loan documentation practices must enable an informed lending decision, identify the purpose and source of repayment, ensure any claim against the borrower is legally enforceable, demonstrate administration and monitoring, and take account of the loan's size and complexity (12 CFR Part 30, Appendix A, II.C).
• The rating has to be defensible inside the memo. The OCC's position is that "the rating assigned to a credit should be well supported and documented in the credit file," against the five regulatory categories of pass, special mention, substandard, doubtful and loss (OCC, *Rating Credit Risk*, Comptroller's Handbook).
• The supervisory reference changed in mid-2026. OCC Bulletin 2026-29 issued the Lending and Loan Portfolio Risk Management booklet on 25 June 2026 and rescinded the April 1998 Loan Portfolio Management booklet (OCC).

Which page you actually want. This is the short US definitional answer. For the full anatomy of the document across markets, read the pillar, what is a credit assessment memo. For the fields and the file to build from, use the commercial credit memo template for US banks.

What is a commercial credit memo, and what is it not?

It is the underwriter's argument. It reduces everything collected on a business borrower — returns, transcripts, statements, bureau data, appraisals, searches — to a written case that the loan should be made on stated terms at a stated risk grade. Also called a credit write-up, credit memorandum or credit approval memorandum; outside the US, a credit assessment memo or CAM.

Three things it is not:

• Not an accounting credit memo. A credit memo in accounts payable reduces an invoice. Same two words, unrelated instrument.
• Not the loan application. The application is what the borrower asserts. The memo is what the bank concluded after testing those assertions.
• Not the approval. Approval is the committee action recorded on the memo — date, attendees, quorum, vote, conditions added, dissent. A memo without that block is a draft.

What must a commercial credit memo contain?

Eleven sections. The right column is the test that matters: which of the five documentation objectives in 12 CFR Part 30, Appendix A, II.C does the section satisfy? A section satisfying none of them is padding.

Two fields get dropped more than any others, and both are dates: the date of value on collateral and the as-of date on every financial statement. "Appraised at $3.1 million" without a date is not evidence of anything.

What does the repayment-capacity section look like?

Kestrel Fabrication LLC, an Ohio metal fabricator, requests a $1,750,000 term loan at 7.25% over 10 years, with two owner-guarantors.

Business cash available for debt service, FY2025 (per Form 1120-S, tied to the IRS Return Transcript):

Net income 412,000 + Depreciation and amortization 268,000 + Interest expense 141,000 = EBITDA 821,000 − Unfinanced capital expenditure (120,000) − Cash taxes and tax distributions (98,000) = Cash available for debt service 603,000

Debt service:

Existing term debt, P&I 186,000 Proposed $1,750,000 @ 7.25%, 120 months 246,500 = Total annual debt service 432,500 Business DSCR = 603,000 / 432,500 = 1.39x

Global, adding both guarantors:

Guarantor net personal income 145,000 − Personal living expenses (96,000) = Guarantor contribution 49,000 Global cash available 603,000 + 49,000 = 652,000 Global debt service 432,500 + 52,000 = 484,500 Global DSCR = 652,000 / 484,500 = 1.35x

The guarantors add coverage, but only 49,000 of it, against 52,000 of personal debt service — so global DSCR lands below business DSCR. Against a 1.25x covenant floor, headroom is 0.10x, roughly a $48,000 fall in EBITDA. That sentence belongs in the memo. The build itself is in global cash flow analysis.

How long should it be, and who signs it?

Six to twelve pages of narrative for a $1m–$10m secured request, with spreads, the cash flow build and the collateral schedule as exhibits rather than body text. No supervisory guidance sets a page count; treat this as common practice. Length is the wrong lever anyway — an examiner samples for support, not volume.

Sign-off follows the board's delegated authority matrix, measured on total obligor group exposure, not the single facility: one credit officer, two signatures, an officers' loan committee, or the directors' loan committee for the largest exposures and insider credits. The full sequence sits in commercial loan underwriting in US banks.

What gets a memo sent back?

• One figure carrying two values in two sections, most often EBITDA between the spread and the DSCR build.
• Repayment capacity asserted as a ratio with no visible arithmetic.
• A risk rating with an adjective instead of a rationale.
• Collateral values with no date, or an appraisal older than the bank's own currency rule.
• Policy exceptions named in the narrative but absent from the exception table.
• Financials never tested against the IRS transcript — the reason Form 4506-C is ordered at intake, not after the spread.

The 47-item pre-submission sweep is in the credit memo checklist; the file behind the memo is in the examiner-ready credit file documentation checklist.

Key takeaways

• The memo is the argument for the loan — not a summary of the application, and not the approval itself.
• Eleven sections; each should map to a documentation objective under 12 CFR Part 30, Appendix A, II.C, or it does not belong.
• The dropped fields are dates: date of value, statement as-of date, perfection date, PFS date.
• Show the DSCR arithmetic line by line, then state what would break it.

Frequently asked questions

What should be included in a commercial credit memo?

Transaction summary, borrower and ownership, facility structure, sources and uses, management and guarantors, industry, financial analysis, repayment capacity, collateral with lien position, risk rating and policy exceptions, and covenants plus the committee action block. Every figure needs a source you can point to.

How long should a commercial credit memo be?

Six to twelve pages of narrative for a typical middle-market secured request, with the spreads and cash flow build attached as exhibits. Nobody supervises page counts. What gets tested is whether the analysis supports the rating and the approval.

Who signs off on a commercial credit memo?

Whoever the board's delegated authority matrix names for that level of total obligor exposure — a single credit officer, two signatures, an officers' loan committee, or the directors' loan committee for the largest exposures and insider credits.

Is a credit memo the same as a credit write-up?

Yes. Credit memo, credit memorandum, credit write-up and credit approval memorandum all describe the same document in US commercial banking. Indian and Gulf lenders usually call it a credit assessment memo or CAM.

How is a US commercial credit memo different from an Indian CAM?

Repayment capacity runs on global cash flow rather than MPBF, income is verified against IRS transcripts, guarantors get a standalone analysis with a liquidity test, and classification runs on the pass-to-loss scale rather than IRAC.

Can an AI-drafted credit memo be used for a real approval?

Yes, provided every figure traces to a source document, a named human reviewed and attested to it, and the version history shows what the machine drafted versus what the approver signed.

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